USDA Relief for Borrowers in OK Counties Affected by Tornado
Investor Update: On May 24, the U.S. Department of Agriculture (USDA) released an update titled USDA Relief to Borrowers in Oklahoma Counties Affected by Tornado.
USDA Relief to Borrowers in Oklahoma Counties Affected by Tornado
This announcement describes measures mortgagees may employ to provide temporary relief to USDA Rural Development Section 502 Guaranteed Loan Program (GLP) homeowners living in parts of Oklahoma acutely affected by the massive tornado on May 20, 2013. The disaster area declared by President Obama currently includes Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties. The following relief options are available to mortgagees to implement on behalf of impacted Section 502 Guaranteed Loan borrowers living in these five counties, and any impacted areas the Federal Emergency Management Agency (FEMA) designates as eligible for individual assistance:
1. FORBEARANCE REQUEST: USDA Rural Development encourages holders of Section 502 Guaranteed loans to extend forbearance alternatives to borrowers in distress as a result of the devastation of the tornado. Careful counseling with borrowers should help determine whether their difficulties are directly or indirectly related to the tornado, or whether they stem from other sources which must be addressed.
2. FORECLOSURE MORATORIUM: Although the loan holder is ultimately responsible for determining when to initiate foreclosure and for completing termination action, USDA Rural Development requests that holders establish a 90-day moratorium from the date the President declared the disaster. The foreclosure moratorium applies to the initiation of new foreclosure actions and foreclosure actions already in process.
Due to the impact of the tornado, holders and servicers should ensure that all foreclosures scheduled during the moratorium are reviewed prior to sale to ensure that borrowers significantly affected by the tornado are afforded payment relief. If a determination has been made that the property or the borrower has been so affected, the initiation of foreclosure and or a loan that is currently in the process of foreclosure should be delayed during the 90-day moratorium period.
Loan holders remain responsible for determining when to initiate a foreclosure, and for completing termination actions on a defaulted loan. However, USDA Rural Development encourages efforts to help deserving borrowers maintain homeownership. USDA Rural Development will not apply the provisions of 7 CFR 1980 Subpart D at §1980.374, concerning the expeditious liquidation of loans, during moratoriums established in response to this natural disaster. If a qualified loan is ultimately liquidated, the period of the moratorium will be considered as "Rural Development-Requested Forbearance" when processing a loss claim.
3. LATE CHARGE WAIVERS: USDA Rural Development encourages all servicers to waive late charges on loans in the disaster area.
4. PROPERTY INSPECTIONS: Due to the magnitude and impact of the tornado, loan holders and servicers should inspect properties that secure loans to ascertain the extent of damage and the occupancy status, particularly if contact has not yet been made with the borrower. This is especially true if an appraisal or broker's price opinion was completed before the disaster, or if the area wherein the subject property lies is declared a disaster area.
5. DOCUMENTATION: Holders and servicers should fully document their decisions when loss mitigation servicing actions are provided.
Questions regarding the matters outlined in this letter may be addressed to the USDA Rural Development Single Family Housing Guaranteed Loan Division, at (202) 720-1452.
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